You are considering purchasing a new home.You will need to borrow $250,000 to purchase the home.A mortgage company offers you a 15-year fixed rate mortgage (180 months)at 9% APR (0.75% month).If you borrow the money from this mortgage company,your monthly mortgage payment will be closest to:
A)$2585.
B)$660.
C)$2535.
D)$1390.

Question

Quizplus · Accepted Answer

To calculate the monthly payment using the formula for a fixed rate mortgage, we use the following variables:
P = principal (amount borrowed) = $250,000
r = monthly interest rate = 0.75%
n = total number of payments = 180
Using the formula: 
Monthly Payment = P * (r*(1+r)^n) / ((1+r)^n - 1)
Monthly Payment = 250000 * (0.0075*(1+0.0075)^180) / ((1+0.0075)^180 - 1)
Monthly Payment = $2,534.23
Therefore, the closest monthly mortgage payment option to choose is C) $2535.

You Are Considering Purchasing a New Home